As a start-up, sourcing funds for your business may seem daunting as bank loans are often difficult to obtain with just a business idea and no tangible assets. But, there are other ways.

Here is a basic overview of the various stages and sources of funding that you might want to consider as a start-up. However, keep in mind that, naturally, each start-up is different which means that everyone’s journey towards a mature business will greatly depend on its individual characteristics.

There are two basic types of sources of funding for start-ups: internally (using your own funds) or externally (through investors).

1) Early stages (includes pre-seed, seed or angel investing)

If you have initial ideas, are still developing products or your business is not fully operational yet

Pre-seed Funding: 0-10% equity, approx. less than $600 000

Pre-seed funding occurs at the very early stages of a start-up, that is, where an idea for a product has not yet been finalised. This is often provided by angel investors (possibly hyperlink to Dictionary or Raise Money Tab?). This type of funding is generally less than $600 000 ($500 000 USD) in value or 0-10% of equity.

The Pre-seed stage is a relatively new concept in the entrepreneurial space. Due to the increasing amounts of money (more than $1 mil) that have been granted under seed funding, the pre-seed stage has emerged to give financial access to smaller start-ups who may be excluded under seed funding.

Seed Funding: 5-25% equity, approx. $600 000-$1 mil

Seed funding is the money that a start-up may receive before it is commercialised. At this initial stage, basic research may have been conducted but there may not be a concrete business plan or idea. Seed funding is then usually a small amount of money received by a start-up to continue to develop the product, perform market research, evaluate business potential and investigate other parts of the business idea.  These funds are often provided by either angel investors or early stage seed venture capital (VC). This is usually around $600 000 - $1 mil or 5-25% of equity.

2) Expansion (includes early expansion, expansion or late expansion)

If you have developed product(s), entered the market and significant revenue growth approaching profitable operating levels

At this stage of financing, the start-up has generally introduced their product into the market and has begun to generate revenue. Based on how mature the start-up is, it may be eligible for a range of funding from venture capitals or certain angel investors. A start-up usually receives Series A funding from venture capitals first and may receive subsequent Series B and Series C funding when it continues to scale and requires additional capital.

Series A Funding: 15-25% of equity

Series A funding describes the first investment that a venture capital makes in a start-up. This type of financing usually occurs after seed funding. It is generally given to start-ups when it is creating some revenue but not yet generating net profit. Venture capitals or angel investors usually provide Series A funding in return for equity or convertible debt depending on your negotiation with them.

Series B Funding and further:

After your first venture capital funding, you might be able to receive additional funding when you wish to grow your business further. The amount of equity that the venture capital might receive in return is usually based on your negotiations with the venture capital. It is usually extremely rare for a start-up to receive more than two rounds of venture capital funding.

3) Later Possible Options

If you are a mature business that wants to sell

After your company has developed into a mature business, you may want to sell to get a return from your initial investments or to provide a return to venture capitalists on their investments. This may be in the form of an Initial Public Offering (IPO). Another reason for an IPO may be to raise money quickly to continue to fund additional business growth.

More Information and Opinions on Stages of Funding

If you want further information or different ways of looking at stages of funding for start-ups



Manu Kumar, The New Venture Landscape (2014) K9 Ventures <>


Pre-seed & seed funding:

Expansion financing:

Initial Public Offering (IPOs):